Rupa Dyeing & Printing (P) Ltd v. Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1145 OF 2004 INCOME TAX APPEAL NO.1145 OF 2004 Rupa Dyeing & Printing (P) Ltd. ..Appellants Versus Deputy Commissioner of Income Tax Special Range - 16, Mumbai .Respondent Dr. Shivram along with Mr. A.R. Singh i/b. Mr. P.K. Parida, for the Appellant. Mr. Vimal Gupta, for the Respondent. CORAM : SWATANTER KUMAR, C.J. A.P. DESHPANDE, J. DATED : P.C. . We have heard learned Counsel appearing for the parties. 2. The present Appeal under Section 260A of the Income Tax Act is directed against the order of the Income Tax Appellate Tribunal dated 26th July, 2004. The Tribunal upheld the view taken by the first Appellate Authority being the Commissioner of Income Tax (Appeals). However, it granted partial relief to the assessee by allowing certain additions which were made. The legality and correctness of the order is questioned on the ground that the addition of Rs.40.00 lakhs is made by the Assessing Officer while relying merely on the statement recorded during the course of search under Section 132(4) of the Act which was subsequently retracted. Such reliance according to Appellant is improper, illegal, without authority of law and as such is liable to be deleted. In fact this is the main question of law proposed by the assessee appellant in the present Appeal. 3. The Raiding party had conducted search and seizure on the premises of the assessee on 1st March, 1994. During the search and after the searching party was not satisfied the assessee is stated to have said that there was undisclosed income of Rs.40.00 lakhs. The assessee answered the questions as follows:- "Q.5. Please explain the disclosure of Rs.40 lacs in what form is lying? A.5. The amount disclosed Rs.40 lacs consist of Sundry receivable, stock, furniture and construction & repairing of factory building and machinery, the Sundry receivable, stock, furniture and construction & repairing of factory building and machinery, the bifurcation of which will be submitted within a week. Q.6. Please state the details of tax payable on the disclosed income? A.6. I will try to pay tax as early as possible." 4. According to the Appellant he received a copy of the statement on 16th March, 1994 and after taking considered view he retracted from the statement on 2nd April, 1994. We may notice that according to the learned Counsel appearing for the Revenue, it is on record that the retraction was after taking legal opinion and the retraction itself was after such a belated period that the retraction loses all its significance in fact and law. 5. The argument raised on behalf of the Appellant is that even if the statement under Section 132(4) is taken to have been made by the Appellant as there was no documentary evidence or supporting documents found during the search, the same could not be used for the purpose of making an addition of Rs.40.00 lakhs in the accounts of the assessee. Reliance is placed upon the case of Pullangode RubberProduce Co. Ltd. vs. State of Kerala & Anr., (1973) 91ITR 18. Reliance is placed upon the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala & Anr., (1973) 91 ITR 18. 6. We are afraid that the contention raised on behalf of the appellant is without any merit. Firstly, the Assessing Officer had examined all these aspects and then came to a finding of fact. After making other inquiries touching the statement of the assessee in relation to undisclosed income evidence or supporting documents found during the search, the same could not be used for the purpose of making an addition of Rs.40.00 lakhs in the accounts of the assessee. Reliance is placed upon the case of Pullangode RubberProduce Co. Ltd. vs. State of Kerala & Anr., (1973) 91ITR 18. Reliance is placed upon the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala & Anr., (1973) 91 ITR 18. 6. We are afraid that the contention raised on behalf of the appellant is without any merit. Firstly, the Assessing Officer had examined all these aspects and then came to a finding of fact. After making other inquiries touching the statement of the assessee in relation to undisclosed income of Rs.40.00 lakhs the Assessing Officer directed an addition thereof. This view of the Assessing Officer was not disturbed either by the Commissioner of Income Tax (Appeals) or by the Tribunal. It appears from the record as noticed disturbed either by the Commissioner of Income Tax (Appeals) or by the Tribunal. It appears from the record as noticed in para.10 of the order of the Tribunal, the order impugned in the present Appeal that, during the search two diaries belonging to the dyeing masters were also recovered and thereafter the searching party found excess materials at the site for the months as noticed in the order of the Tribunal. It was noticed that :- "He noted that it was not clear as to why for both the months the dispatch shown of processed cloth to customers was less than the actual quantity of grey cloth processed during the month." 7. After considering the documents on record and the fact that except writing a letter for retraction of statement the assessee failed to furnish any details nor made protest on the undisclosed income of Rs.40.00 lakhs. The Tribunal arrived at a finding of fact which read as under:- "That being so, the retraction made by him from the said statement, a month later, cannot be accepted as bringing out the truth that what was admitted in the earlier statement at the time of search was because bringing out the truth that what was admitted in the earlier statement at the time of search was because of pressure exercised by the search party or under duress. In any event, the said statement under S.132(4) made at the time of search, though retracted subsequently, contains an admission, which binds the parties. We are fortified in this behalf by the decision of the Apex Court relied upon by the learned Departmental Representative noted above. The exhaustive reasoning given by the CIT (A) on pages 15 to 17 of the impugned order is quite convincing, and we are in complete agreement with the same. The parties. We are fortified in this behalf by the decision of the Apex Court relied upon by the learned Departmental Representative noted above. The exhaustive reasoning given by the CIT (A) on pages 15 to 17 of the impugned order is quite convincing, and we are in complete agreement with the same. The decision cited by the learned Counsel for the assessee, have no application to the facts of the case on hand. In this view of the matter, we uphold the order of the CIT (A) on this issue and reject the ground of the assessee." 8. The Tribunal also noticed that besides other judgments which have been referred in the order of the Tribunal the case of the assessee was squarely covered by the judgment of the Supreme Court in Surjeet Singh Chhabra vs. Union of India (1997) 1 SCC 508 ground of the assessee." 8. The Tribunal also noticed that besides other judgments which have been referred in the order of the Tribunal the case of the assessee was squarely covered by the judgment of the Supreme Court in Surjeet Singh Chhabra vs. Union of India (1997) 1 SCC 508 vs. Union of India (1997) 1 SCC 508 where it was held that the retraction made even after six days was hardly permissible even in the case under the provisions of Customs Act and FERA Act and was an admission which would bind the assessee. Besides this, in the light of the judgment of the Supreme Court in the case of Pullangode Rubber Produce Co.Ltd. (supra) a statement recorded by way of compulsion or a statement as a result of threat or coercion by itself should not bind the assessee. But this exception is hardly applicable in the present circumstances. Fresh documentary evidence before the Assessing Officer which had been recovered during the course of search on 1st March, 1994 served basis for addition made by the Assessing Officer. The documents were taken into custody and besides that the assessee took advantage of stopping the proceedings of the search and seizure by making a statement before the raiding party. Having taken advantage of that now he can hardly be permitted to argue that the statement made on that date cannot be looked into for any purpose and more so for making an addition of undisclosed income of Rs.40.00 lakhs. In our view the statement was not the sole basis of addition, but even other factors like additions made under different heads and the diaries surrendered for the same are the basis for the addition. The finding of fact arrived at by the Tribunal is not so perverse that it needs to be interfered with by this Court in exercise of its powers under Section 260A of the Act. No question of law much less substantial question of law arises in the present case. Hence Appeal dismissed. CHIEF JUSTICE CHIEF JUSTICE A.P. DESHPANDE, J. A.P. DESHPANDE, J.